June, 1999

From the Editor

New Vigilance Required

As the industry gathers in New Orleans for the IDDBA convention and exposition, retailers have a right to feel good about the state of the deli trade. After years of dismissing the deli industry as some kind of relic of the past destined to be superseded by some kind of HMR department or industry, it turns out that deli is the HMR department.

So, though many of the one-time motivators, such as Boston Market and Kenny Rogers Roasters, are now operating at the sufferance of the bankruptcy courts, deli departments are continuing to grow.

Yet all is not perfect. The greatest long-term threat to the industry clearly stems from the possibility of food safety problems, a difficulty brought to the fore this year with numerous findings of listeria in meat products.

It is still not clear that all members of the industry fully understand the consequences of food safety problems. As supermarket chains grow, the possibility that one incident could alienate customers from an entire chain becomes more threatening to the industry. As manufacturers consolidate, the notion that a food safety incident with one brand could bring disrepute on every deli in the country is not far-fetched.

To date, most food safety programs for retailers have focused on retailers’ own operations. Particularly important in cases where stores are doing their own food preparation, these programs involve all the usual things – hand washing, proper storage, cold chain maintenance, bacteriological testing, etc.

These are all exceedingly important and, indeed, logical first steps in a comprehensive food safety program. Still, the implications of the past year’s food safety problems, many of which were manufacturer-based, is that retailers are going to have to step up to the plate and get involved in extensive certification of approved manufacturers.

The problem is that good safety procedures are expensive. More often than some want to admit, people have been known to avoid testing for things because the wrong test result would result in having to discard fortunes in meat products. This is not to say the manufacturers were callous people operating without regard for food safety; in most cases the manufacturer felt no one was at risk anyway since, properly cooked, the food would be fine for consumption.

Still, the dynamic at work here is of grave concern. Retailers, fighting for the best price and quality, concentrate on buying the finished product. Producers respond to this demand by cutting corners on those things not rewarded by the buyers. In effect, one gets a race to the bottom in which food safety procedures and their concomitant costs are minimized so that sales and profitability can be maximized.

The break on this, of course, has been government regulation. But government regulation is becoming less effective as the risks switch from the kind of risks observable through inspection to the often invisible world of bacteriological contamination.

Besides, government regulation is always least effective when it tries to stand in opposition to market forces. The power of capitalism is so great that every teenager in America can buy illegal drugs, despite decades and trillions spent opposing the industry.

The real solution has to come from a new recognition by buying organizations that they are the ones calling the tune. If buyers reward proper food safety practices, these food safety practices will be followed. If buyers reward skimping by giving their orders to the cheapest guy, we can all expect plenty of skimping.

Many retailers pretend to be interested in food safety. Several have requirements that suppliers sign forms or submit affidavits swearing they follow legal requirements or have HACCP plans or follow other food safety guidelines.

Most of this is just, as they say, CYA stuff that the lawyers made the chains do to protect themselves in the event of liability lawsuits.

The next stage is going to have to be responsible buying organizations standing up and utilizing their economic power to demand compliance, by manufacturers, with the highest caliber of food safety procedures.

This means retailers have to do two things: First, they have to acquire the ability to evaluate food safety efforts by manufacturers and second, they have to be willing to insist on pre-clearance as a condition of doing business.

The shocking thing is how many retailers are willing to buy from anyone, even private label products, without requiring a thorough food safety evaluation.

This will probably end. The great trend of the last 20 years has been the privatization of the economy. The next stage of privatization is likely to be more subtle. It is the stage in which functions formerly performed by the state, such as ensuring food safety, will increasingly become the province of private actors in the economy.

The private actor with the power in the food industry is the buyer and, as one version of the golden rule tells us, he who has the gold makes the rules. If poor safety procedures are allowed, it is the retailer who will ultimately be found at fault. And found liable. Forewarned is forearmed.  DB